Why Can’t China Make a Good Ballpoint Pen?

The title of this post comes from an absolutely terrific NPR Marketplace article of the same name. If you are doing anything related to manufacturing in China or anywhere else, this is the one article you should read this year.

Why can’t China make a good ballpoint pen?

The article is based on a questions Chinese Premier Li Keqiang asked at a seminar in Beijing earlier this month. Li went on to complain how Chinese pens felt “rough” compared to pens made in Japan, Germany, and Switzerland and talked of how China’s manufacturers should focus on innovating their technology.

After a previous time when Premier Li had grumbled about Chinese pens CCTV put on a talk show with “three CEOs of China’s most innovative and successful manufacturers,” including Qiu Zhiming, president of one of China’s largest pen manufacturers. Qiu explained how China supplies 80 percent of the global market for pens but imports the core technology of each pen — the stainless steel ball and its casing — from Japan, Germany, or Switzerland. He then told of how only Switzerland has “a machine with the precision required to make the best ballpoint pen tips.” A Chinese air conditioner manufacture CEO then chimed in:

Dong Mingzhu, the CEO of Ge li (Gree), a Chinese air conditioner manufacturer, frowned at Qiu from her perch onstage.

“Think about it. How much money have the foreigners made from us because they have better technology?” asked Dong. “You don’t have this technology and they’re taking your profits! You know what I’m going to do? I’ll have my best people make you a machine like the Swiss have! I’ll make it in a year and sell it to you for half the price!”

The studio audience applauded loudly. Her promise seemed ludicrous – It took years of R&D for the Swiss to make a machine like this, and now she, an air conditioner manufacturer, promised to do the same in months. The CEO beside her onstage who runs a machine tool company pointed this out, but the CCTV host quickly shot him down, calling him jealous.

Pen maker Qiu shifted in his seat. He smiled uneasily, and knowing full well Premier Li Keqiang would be watching this program, he said the only thing he could muster to such an absurd promise.

“I thank you on behalf of the pen manufacturing industry,” he told Dong.

I am troubled by the promise of the air conditioner company CEO because it so much reminds me of the many Chinese manufacturers that promise the ability to make something that they simply do not have.

But why can’t China make a good pen?

Platinum Pen president Huang Xinghua “says the problem is the Chinese market”:

To explain, he gives a tour of his quality control room, where workers do nothing but click brand new pens all day to make sure they work properly.

“We click the pens that’ll be sold in China only once, because Chinese consumers are more price-conscious,” explains Huang. “The pens that’ll be exported to Japan? We click them twice. They’ll pay twenty cents more for a better pen.”

Huang has made pens for 42 years. He’s visited Japan, Germany, and Switzerland dozens of times to study how to improve his pens’ quality, and he’s done just that.

During the CCTV talk show with the three CEOs, the host asked the three Chinese CEOs to “Take three seconds and think of an innovative product that is uniquely Chinese.” Here is what happened in response:

First up was Qu Daokui, CEO of a robotics company. “If I close my eyes and try to think of a product that has Chinese characteristics and is recognized internationally,” stammered Qu, “I can’t think of one.”

Next, it was the machine tool CEO’s turn. “There are two things that only Chinese people can make,” explained Guan Xiyou, CEO of Shenyang Machine Tool Group, “The first is fireworks. The second? Folding fans. Foreigners still can’t make a good folding fan.”

Qiu Zhiming, the CEO of the ballpoint pen company, was no longer in the hot seat. He sat quietly, watching the CEOs onstage stammer answers to this essential question.

And he smiled.

Will China ever make a good ballpoint pen? Why or why not? If why, then when? What about Chinese cars, do you just assume that they are not as well made as their Japanese, Korean or U.S. competitors? And what about China’s new passenger jet? Are you willing to fly that? Will you be a bit more worried than usual when you do? What is up with all of this?

Dan Harris is internationally regarded as a leading authority on legal matters related to doing business in China and in other emerging economies in Asia. Forbes Magazine, Business Week, Fortune Magazine, BBC News, The Wall Street Journal, The Washington Post, The Economist, CNBC, The New York Times, and many other major media players, have looked to him for his perspective on international law issues.

I think first of all, the leaps and bounds that the Chinese economy has made over the last few decades has largely covered up for some gaping holes that usually require time and a concentrated national effort to fill. The manufacturing process is one of these holes, which China has by in large attempt to address by throwing money at it. You can see in the quoted passage itself that these CEOs reduce the problem to “not having the right machinery” – and that’s not exactly accurate. In the increasingly more behemoth SOEs (at least in the industries I play around in, and in industries such as aerospace), equipment are either up to standards or beyond the standard level of leading international manufacturers.

The problem is, specifications and processes take time, and specifications can’t be just “bought” – even should people willing to be sell, you need engineers with a focus on problem solving and years or even decades to localize and adapt mature processes to local characteristics. And often, in these large institutions, you need a cross department mandate. Neither of these happen to be true for engineers in large institutions here, who mostly are incentivized to be political animals, and seen as the ones who do grunt work/black sheep work.

As for the SMEs, despite the increasing clamor and “pledge” up top to “support” SMEs, advanced manufacturing and precision machinery is still seen by the government officials(with their backgrounds and training) as the fief of large SOEs or equivalents, which increasingly has meant either SOE or multinationals. In fact, should a government related company give such a job to a SME instead of the multinational company or the OEM, the decision makers in that company would immediately be vulnerable to graft and corruption accusations. This means effectually, SMEs are out of the game by virtue of birth.

Second, I think the issue of the role of quality does come up in this market, but not exactly like how Mr. Huang sees it. He thinks the main issue is the market doesn’t want to pay more for higher quality pens, I point to the noveau riche and millions of others who flock to Japanese second hand stores to pay ridiculous prices for foreign pens. The problem isn’t so much consumers aren’t willing to pay a premium for quality, it’s that they don’t trust Chinese manufacturers to come up with the quality that’s worthy of a premium. Why is that? I think that ties into a point I’ll make later.

As for larger, b2b orders which don’t deal with consumers, these markets tend to be dominated more often than not by the omnipresent SOEs, and as mentioned above, under the influence of the previous 10 year regime before the current one, any order given to a supplier or a partner outside of the “accepted” standards – i.e. a large multinational company or OEM, a fellow SOE – would be seen as political suicide, and seeing how the hopes for advancement for nearly every member in every department in a SOEs is tied to politics, you’ll have to pardon their lack of interest in investigating “high quality” alternatives to “politically safe” choices. This is bad enough in regional SOEs, but particularly exasperating in central government controlled ones – of course this all depends on perspective, exasperating for me, exhilarating for particular multinational companies of a certain scale. Ironically, it’s these multinational companies who operate in China who will more likely than not appreciate the quality, but then you’ll need to fight uphill through a maze of pre-existing vendors and approval processes.

As for why consumers don’t trust Chinese manufacturers – they haven’t earned it, or haven’t been allowed to exist long enough to earn it. Brand building takes time and investment, but entrepreneurs in China aren’t inherent more long-term risk averse than entrepreneurs elsewhere. Why the persistent quality fade phenomenon? My speculation is that part of the reason is that for every Xiaomi, there’s also a Gome, and it usually doesn’t need to get that big to get the vultures circling. Another part is that entrepreneurs are like any other human beings who prefer the path of least resistance, and right now starting a P2P company and disappearing in 2 years seems a lot more attractive than starting a manufacturing company, refining your processes for 10 years, then finding out regulations or other factors have upended your market.

As for your final question – I do find it plausible that China will make a good ballpoint pen in the forseeable future: in the end, it is still a demand driven product produced by privately owned enterprises and the market demand exists and is growing. On the other hand, I don’t forsee myself voluntarily getting on a passenger jet assembled in China in my lifetime.

ollumi

Also remember that for a lot of these companies you mentioned – car manufacturers, ventures into aerospace – the end goal is to maintain control by a particular group over a particular sector, not to “make a better product to win customers over”. That makes all the difference when you get down to the nitty gritty of actually making a product.

Vigarano

As ollumi said, and of course, it’s not so much getting on a passenger jet assembled in China as getting on one with China-made engines attached to the wings.

Years ago, when I started traveling to Shanghai (1-2 times a week, for a couple of years) regularly from Hong Kong, I was interested to observe the sound of the exhaust fans in the tunnel under the river. Road tunnel exhaust fans make very little noise in other countries. In China they roar. Not a good sign, and one that took my mind quickly to aircraft turbines.

Ward Chartier

There is a pervasive attitude in China that is limiting the ability of the country’s manufacturing resources to attain international standards. That attitude is, “Good enough for China.” As long as the Central Government and the rising middle class accept goods and services that are mediocre, this attitude will remain entrenched.

While living and working in China, I once worked for a major European company. Many of the boxes of raw material we received from Europe were marked “China scrap” In other words, the material was not good enough for European consumers, but was deemed good enough for consumers in China.

Rising out of WW2, the focus in Japan’s industries was on achieving international standards, not producing “Good enough for Japan”.

Simon

This is exactly the kind of post I come to ChinaLawBlog for whenever I become too paranoid about China’s economy becoming too dominant.

Yeah for sure, China has proved that they learn new technology quickly and in near time they will be able to produce anything with affordable prices.

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